Ironically, over the last six weeks or so Iceland has got off remarkably lightly from the disruption caused by its temperamental volcano Eyjafjall. Now, however, the fallout begins to settle. Icelandair’s forward bookings are a staggering 75% DOWN on previous years and Iceland Express has delayed its new Gatwick-Akureyri service until 2011. The airline also appears to have pulled its Birmingham-Reykjavik service, due for launch 6th June.

However, for the intrepid traveller tempted to visit Ultima Thule, there is a silver lining to this dire situation: 1) Iceland remains comparatively affordable since the 2008 crash, 2) there is a conveniently accessible world-class volcano belching in the background, and 3) you’ll have the place to yourself. In other words, there’s never been a better time to visit!

Iceland’s second airline, (not so low-cost) Iceland Express has just announced plans to start flights four times a week to JFK next summer from Reykjavik. Also just today, it has been reported that (perhaps in response to above news) Icelandair plans to boost capacity next summer by 10%. If – and it is a bit of an “if” – either or both these developments pan out, there might be some tasty deals in the offing for transaltlantic travellers departing from UK airports served by these carriers.

Here’s something from Icelandair, first seen earlier this year. The ad is promoting the airline’s improved aircraft interiors to its home market. It’s refreshing to see that chintz can still be found in Nordic parts, despite the omnipresence of IKEA.

On 22nd July Icelandair launches a four-times weekly service from Reykjavik (KEF) to Seattle. Even in good times this might seem a little eccentric, but in the current downturn and with the airline’s home country financially devastated, “bonkers” might seem a better description. However there is a logic to the move which may yet give this route a rosy future.

First, despite the “kreppa” at home. Icelandair has a spring in its step at the moment. Most of its business is in dollars and euros and its exposure to the domestic crisis is limited. What’s more, the collapse of the Icelandic krona has boosted tourism to Iceland by making it a little more affordable. This is partially mitigating the slump in traffic being felt by airlines worldwide, Icelandair included. Further, Icelandair had the good fortune of being sold by the FL Group in 2006 – FL Group was one of the first casualties of last autumn’s collapse, being placed in administration in September 2008.

Most significantly, however, SAS Scandinavian Airlines has just dropped its Copenhagen-Seattle service after 40 years on the route. Despite flying the route for decades it was losing money because of increased competition from other European carriers, and using planes (A340s) that were far too big. Icelandair’s B757s will however provide a much better match to demand, and speedy connections at Reykjavik will actually save time for travellers previously transferring at Copenhagen.

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